Trader Voice Strategy
How do you choose the technology that your trading staff use to communicate with counterparties, clients and colleagues? Investment banks are struggling to answer this question. They know the answer is not one size fits all and whereas in the past the choice per user was essentially small, medium or large, today’s options include Cloud solutions that provide multichannel communications in a very different way. Voice is a much smaller part of trading nowadays, but it is still important for financial institutions to have voice systems that support their operating styles. As a result, this is still a multi-billion-dollar sector and the topic of high-value decision making for IT directors.
The Trading Turret
The primary desktop hardware equipment we associate with Trader Voice is the trading turret, also known as the dealer-board. This is a high-end telecommunication device that allows a trader to visualize and prioritize multiple incoming calls and use hundreds of buttons to call contacts quickly and efficiently. Recent units have been modular, allowing capacity and channels to be proportionate to the individual user’s requirements. Turrets also feature multiple handsets, microphones, speaker channels, hoot’n’holler, and intercom systems. Lower volume users and those with support roles may use a reduced spec version or high-spec PBX phones supported by an intercom where necessary. The turret market still features a substantial amount of legacy technology based around TDM technology and well-known companies are still investing in it. It’s a reliable option that is pretty cheap these days and the user experience for traders is tried and tested.
UC functionality is available through some modern turrets but the integration is not firmly established. Instant messaging and IP conferencing work well whereas presence, signified by the red, amber, green system familiar to Microsoft Skype for Business [S4B] users, is more of a challenge. It is complex to establish a meaningful presence status on a turret because of the number of channels, some of which are open, and the different ways a user may be engaged in communication or core activity at any given time. S4B itself is not fit for purpose as a turret replacement, not that Microsoft ever claimed it was. Large UC providers who also manufacture turrets have generally not sustained their products for the trading floor.
Soft Voice Clients
Across all industries, the trend is away from phones and towards headphones hooked up to PCs with soft-voice-clients. The same trend is affecting Trader Voice. So, not only are the bulky server cabinets becoming a thing of the past, the desktop equipment may go that way too. A clear advantage of a soft-client is flexibility. The system can be accessed online with a straightforward security log-in. With traders being one of the last bastions of the stationary workforce, some of that advantage is irrelevant but disaster recovery and business continuity possibilities, reduced total cost of ownership, reduced desk space, and simpler upgrades, mean that soft-clients are a relevant part of any modern Trader Voice System [TVS] solution and consequently, the decision-making process becomes more complex.
There are three fundamental soft-voice-client offerings:
- An enterprise offering in which a soft-client is offered to all staff. The system is accessed securely online with no software installed in the user device. “Full turret functionality” is achieved with the addition of some peripherals.
- A subscription “As A Service” [AAS] model where users subscribe and unsubscribe as required, with their accounts provisioned in minutes. As well as subscribing to the service, users essentially subscribe to other internal and external contacts. This model tends to have the lowest costs and is naturally the least feature-rich, but it can be very effective when all the relevant contacts also subscribe. Even with peripherals, it can’t be considered a turret replacement.
- A hybrid where the enterprise solution is sold but the AAS aspect is also pushed.
With the paradigm changing, the general sense is that we are into the final generation of the traditional turret but the sector still presents a big enough opportunity for new companies to be entering the market with desktop hardware. Of course, anyone who buys physical turrets can expect to be offered a soft-client for each one as part of a BCP/DR solution. The key aim of DR is for users to be able to sit down and start working again when their office becomes unviable following a crisis, the pure AAS model will struggle to facilitate this if a significant number of DR positions are required by heavy turret users.
As a generalization, banks seek advantage from new technology while remaining cautious about any risk of service disruption. This latest paradigm shift is throwing up new, more complex questions. Banks see the benefit in AAS soft-voice-clients. One difference to previous telecom trends is that there is very little cost or risk of disruption in trialling these systems in their purest form. However, a trial is not the same as a company-wide adoption and, on the downside, an AAS solution only permits the user to talk to other subscribers. The first person to buy a mobile phone had people to talk to, the first person to buy a fax didn’t. Likewise, although many smaller buy-side firms have bought into subscription models and generated a genuine user base, the biggest banks haven’t, so they tend to perform trials on an internal basis.
Banks don’t want to miss out on cost savings or flexibility but they neither do they want to lose reliable functionality or do anything to upset their heaviest trading floor users. They accept that any adoption needs to be phased and external assistance from specialist consultancies is valuable in reaching defensible strategies.
There is also a dilemma for the suppliers in this non-binary, transitional world. Essentially, they are all trying to cater for all parts of the market. As the traditional manufacturers have productized soft-clients, set up their own AAS style trading communities, and acquired software-focused competitors they have never stopped selling physical units. Meanwhile, the subscription suppliers, who haven’t achieved world domination as quickly as they’d hoped, are looking to wrap hardware around their soft turrets, adding more peripherals than they envisaged, and integrating gateways so that external calls can be handled on their platforms; in all cases, increasing costs significantly and moving away from the pure Cloud-based solutions they brought to market.
My company takes an entirely independent position. We have worked with most of the biggest banks and we are familiar with all the manufacturers and suppliers. I believe they all have their own differentiators and could each find a deserved place in the shake-out. This blog is not about which suppliers to choose or avoid, it’s about the challenge of decision making in a changing market.
The first part of the approach is to evaluate the usage profiles of your TVS users and the other colleagues you have responsibility for. Most companies are over-equipped with turrets that are only used to a fraction of their capacity, and with some circuits that are barely used at all. By pulling in data from all relevant sources it is possible to analyze not only call volumes but the preference for channels, speakers and handsets etc. This first phase is accelerated by users of our TIMM™ service that evaluates and cross-references data from the TVS, call logger and HR databases. It is proving popular with investment banks, but the concept is the same however you go about it. Intelligence from this analysis helps to establish the capacity of voice solution that individual users need after the rationalization and migration process takes place.
Functionality and User Groups
In wider enterprise, the selection of voice solutions and the migration to them can be addressed based on locations, buildings, floors or departments. This approach is too simplistic for a wholesale finance environment, especially if more than one vendor will be chosen. Some users have a genuine need for full turret functionality. Establishing who needs what is more complicated than looking at the department, asset class or job title. As well as cost and performance issues there is also an emotional response to deal with because people feel their status is being disrespected when a turret is removed.
Consultancies like JP Reis have always helped to manage this process but, with soft-clients starting to appear in target solutions, the complexity has ramped up. Our TIMM Map™ app is a visual hypothesis tool that helps IT managers work out the best way to transform their TVS estates. Different thresholds, groupings, functions and other parameters can be dragged in and out of a decision-tree interface to test the effect on cost and product mix. Our well-established TIMM Viewer™ app has already been used to help migrate over 5,000 users. This tablet-based solution takes the emotion out of moving users to smaller systems by presenting usage data on “skins” of the user’s current and proposed interfaces. It also serves to validate any decision making that has already been performed.
Compliance and Litigation Defense
Despite the US Government rolling back some aspects of Dodd-Frank in 2018, it remains important to be rigorous about compliance aspects of the selection criteria. MiFID II is the latest big regulatory release that broadens the scope of compliance to far more users across far more communication channels with the aim of facilitating the reconstruction of interactions leading up to a trade. We are seeing Compliance and Security departments playing a greater role in the selection process and they have understandably expressed strong concerns about TVS. Below are three, non-vendor specific issues that ring alarm bells.
- Intercom, hoot’n’holler and speaker channels are audible to people who aren’t on the official access lists.
- It is difficult to record open speaker channels in order to identify individuals involved and discern the details of conversations.
- Barge-in functionality is a TVS standard, it can give people access to information that is unintended for them and has previously been implicated in “front-running” scandals.
A Compliance Officer’s ideal TVS would adapt a customer relationship management system [CRM] like SalesForce in such a way that users could only initiate a call from the CRM to existing counterparties, and details of interactions would be captured across all channels. That may be for the future. In the meantime, some vendors go further than others in supplying integrated voice recording and surveillance, but in reality, none of them supplies more than a partial solution. We help clients define appropriate compliance requirements and build them into a stepwise system selection process. The focus will generally be on integration rather than on native features.
Your total solution may well require more than one vendor, it is best to approach selection with full market visibility as new innovations are appearing with far greater frequency than before. I always aim to give each candidate the chance to pitch on their own terms based on a client’s specific requirements. In this way, the client gets clear visibility of key differentiators while still seeing how well the company’s circumstances have been taken into account. In the current climate, I would advise finding suppliers that will play well together to achieve a robust product and service mix at the right price.
Transformation and Total Cost of Ownership [TCO]
It’s worth mentioning that a huge pricing disparity exists in the marketplace, even between some of the more similar vendors. I don’t want to make a seemingly biased statement so my advice would be to consider TCO and the further investment required to extend the life of any chosen solution. As well as demonstrating openness, viable TCO and current capabilities, it’s also important to assess the credibility of the development roadmap because the industry is clearly in flux. Companies like mine are available to perform integration engineering and testing but that is another expense that needs to be factored in. The industry has moved away from large cabinet requirements now but some systems still come to market at a surprisingly conceptual level. We have had the dubious privilege of being the first consultancy to perform integration work on at least one well-known platform that was little more than a beta release at the outset. Some come with high predicted maintenance costs, and some need a greater number of supplementary peripherals. We help to build contractual expectations around integration, running costs, reliability and compliance so that our clients have a good grip on predictable costs and indemnity against unexpected problems.
The Near Future
Voice communication is not about to leave the trading floor altogether and regulations won’t become softer on a global basis even if some national jurisdictions attempt to take a lighter touch policy. The demands of compliance will shape the market and the drive towards software solutions will continue to drag until significant development work has been performed. In the past, companies have taken a path of least resistance approach to system replacement without considering the full implications of their choices. In the transitional marketplace we see today, it is more important than ever to make informed, strategic decisions and I believe JP Reis is better placed to support that process than anyone else.